day.

To carry these receivables, you would have to borrow funds from your bank at a nominal
9%,daily compounding base dona 36

Tresnan Brothers is expected to pay a $1.80 per share dividend at the end of the year (i.e., D1 =
$1 80). The dividend is expected to grow at a constant rate of 4% a year. The required rate of
return on the stock, rs, is 10%. What is the stock’s current value per share?

Assume that you recently graduated with a major in finance. You just landed a job as a financial
planner with Merrill Finch Inc., a large financial services corporation. Your first assignment is to
invest $100,000 for a client. Because the funds are to be invested in a business at the end of 1
year, you have been instr

Kaye’s Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share and it
has 4.8 million shares outstanding. The firm’s total capital is $110 million and it finances
with only debt and common equity. What is its debt-to-capital ratio?

See Full Question And Answer at solutionrank.com

A company has an EPS of $2.40, a book value per share of $21.84, and a market/book ratio of
2.7 × . What is its P/E ratio?

Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of
18% for 2 years followed by a constant rate of 6% thereafter. The firm’s required return is
12%. a. How far away is the horizon date? b. What is the firm’s horizon, or continuing,
value? c. What is the firm’s intrins

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a
stated dividend of 10% of par, and a current market price of a. $61b. $90c. $100d. $138?

Baker Industries’s net income is $24,000, its interest expense is $5,000, and its tax rate is
40%. Its notes payable equals $27,000, long-term debt equals $75,000, and common equity
equals $250,000. The firm finances with only debt and common equity, so it has no preferred
stock. What are the firm’s ROE and ROIC?

Carnes Cosmetics Co.’s stock price is $30, and it recently paid a $1.00 dividend. This
dividend is expected to grow by 30% for the next 3 years, then grow forever at a constant rate, g;
and rs = 9%. At what constant rate is the stock expected to grow after Year 3?

See Full Question And Answer at solutionrank.com

Assume that today is December 31, 2016, and that the following information applies to Abner
Airlines: • After-tax operating income [EBIT(1 – T)] for 2017 is expected to be $400
million. • The depreciation expense for 2017 is expected to be $140 million. • The capital
expenditures for 2017 are expected to be $22
You want to buy a house that costs $140,000. You have $14,000 for a down payment, but your
credit is such that mortgage companies will not lend you the required $126,000. However, the
realtor persuades the seller t  take a $126,000 mortgage (called a seller take-back mortgage) at
a rate of 5%, provided the loan is pai

Avondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The
stock pays a quarterly dividend of $1.00 and its current price is $45. a. What is its nominal
annual rate of return? b. What is its effective annual rate of return?

Find the following values. Compounding/discounting occurs annually. a. An initial $200

compounded for 10 years at 4% b. An initial $200 compounded for 10 years at 8% c. The present
value of $200 due in 10 years at 4% d. The present value of $1,870 due in 10 years at 8% and at
4% e. Define present value and illustrate i

Benson Manufacturing had a 1.25 operating leverage factor when sales were $50,000. The
company's contribution margin ratio was 20%. What were the company's fixed expenses?

See Full Question And Answer at solutionrank.com

Simon recently received a credit card with an 18% nominal interest rate. With the card, he
purchased an Apple iPhone 6 for $372.71. The minimum payment on the card is only $10 per
month. a. If Simon makes the minimum monthly payment and makes no other charges, how
many months will it be before he pays off the card? Rou

Weston Corporation just paid a dividend of $1.00 a share (i.e.,D0 = $1 00). The dividend is
expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the
expected dividend per share for each of the next 5 years?

You are considering an investment in Just us Corporation’s stock, which is expected to pay a
dividend of $2.25 a share at the end of the year D1Â = $2 25 and has a beta of 0.9. The risk-free
rate is 4.9%, and the market risk premium is 5%. Just us currently sells for $46.00 a share, and its
dividend is expected to gr

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all
of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay
dividends in the near future. A major pension fund is interested in purchasing Brandtly’s
stock. The pension fund manager

The Ohio State Fair is one of the largest state fairs in the United States. It draws nearly one
million visitors over the twelve-day period each July and August. The fair is a nonprofit
organization. It is self-supporting and needs, at a minimum, to break even by generating
revenues through various activities. Among t

See Full Question And Answer at solutionrank.com

William Investors is opening an office in Boise, Idaho. Fixed monthly costs are office rent
($2,100), depreciation on office furniture ($260), utilities ($280), special telephone lines ($600),
a subscription to an online brokerage service ($640), and the salary of a financial planner
($3,120). Variable expenses include

Alpha Manufacturing manufactures 256GB SD cards (memory cards for mobile phones, digital
cameras, and other devices). Price and cost data for a relevant range extending to 200,000 units
per month are as follows: Sales price per unit (current monthly sales volume is 130,000
units) ........ $ 20.00 Variable costs per u

The ReCycle is a bicycle built largely from recycled materials. Identify the following costs
connected with the manufacture of the ReCycle bike as variable or fixed: a. Rubber used in bike
tires b. Recycled aluminum used to make the bike frame c. Lubricant used on clipless pedal
springs d. Quality inspector's salar

Kirby Garage Doors manufactures a premium garage door. Currently, the price and cost data
associated with the premium garage door are as follows: Average selling price per premium
garage door .......................................... $ 3,000 Average variable manufacturing cost per
door ..............................

1. Briefly describe an organization with which you are familiar. Describe a situation when a
manager in that organization could use cost behavior information and how the manager could use
the information. 2. How are fixed costs similar to step fixed costs? How are fixed costs different
from step fixed costs? Give an e

See Full Question And Answer at solutionrank.com

Curtis Walker admired his wife's success at selling scarves at local craft shows, so he decided to
make two types of plant stands to sell at the shows. Curtis makes twig stands out of downed
wood from his backyard and the yards of his neighbors, so his variable cost is minimal (wood
screws, glue, and so forth). However

Boswell's Beanery is a locally owned specialty food product company in Northeast Ohio that has
been in existence for over 30 years. Its products include flavored coffees and teas, dips,
dressings, sauces, and seasonings. The company attends a variety of craft and other shows
throughout the year and sets up a booth at e

The Cupcake Factory plans to open a new retail store in Austin, Texas. The store will sell
specialty cupcakes for $6 per cupcake (each cupcake has a variable cost of $3). The company is
negotiating its lease for the new store. The landlord has offered two leasing options: 1) a lease of
$2,000 per month; or 2) a monthly

Suppose a Luca's Garden restaurant is considering whether to (1) bake bread for its restaurant in-
house or (2) buy the bread from a local bakery. The chef estimates that variable costs of making
each loaf include $0.54 of ingredients, $0.20 of variable overhead (electricity to run the oven),
and $0.71 of direct labor f

Refer to Oodles of Noodles in E7-44B. Since franchising Oodles of Noodles, the restaurant has
not been very successful due to The Noodle Company coming on the scene as a competitor. To
increase its market share, Oodles of Noodles will have to lower its sales price to $6.50 per bowl.
At the same time, Oodles of Noodles

See Full Question And Answer at solutionrank.com

Casual Seating Company is currently selling 2,000 oversized bean bag chairs a month at a price
of $85 per chair. The variable cost of each chair sold includes $60 to purchase the bean bag
chairs from suppliers and a $4 sales commission. Fixed costs are $10,000 per month. The
company is considering making several opera

Three Turtles is a specialty pet gift shop selling exotic pet-related items online. The shop has no
physical location. Results for last year are shown next: For internal planning and decision-
making purposes, the owner of Three Turtles would like to translate the company's income
statement into the contribution margin

Chris DeLozier admired his wife's success at selling scarves at local craft shows (E7-51B), so he
decided to make two types of plant stands to sell at the shows. Chris makes twig stands out of
downed wood from his backyard and the yards of his neighbors, so his variable cost is minimal
(wood screws, glue, and so forth)

Use the information from the Fun Time Cruiseline Data Set. If Fun Time Cruiseline sells 12,000
dinner cruises, compute the margin of safety a. in units (dinner cruise tickets). b. in sales dollars.
c. as a percentage of sales. Fun Time Cruiseline Data Set FunTime Cruiseline offers nightly
dinner cruises departing

Wellington Medical Supply is a retailer of home medical equipment. Last year, Wellington's
sales revenues totaled $6,300,000. Total expenses were $2,200,000. Of this amount,
approximately $1,260,000 were variable, while the remainder were fixed. Since Wellington's
offers thousands of different products, its managers pr

See Full Question And Answer at solutionrank.com

Refer to your answer to S7-7. a. Compute the total number of dinner cruises that Fun Time
Cruiseline must sell to breakeven. b. Compute the number of regular cruises and executive
cruises the company must sell to breakeven. In S7-7
____________________________________Regular Cruise ______ Executive Cruise Sales pr

The U.S. government estimated4 that Air Force One costs the taxpayers $179,750 per hour. Air
Force One is a custom-built Boeing 747 for the president's use while in office. (There are
technically a few planes that are used as Air Force One; whichever one the president is on is
called "Air Force One.") While the preside

Refer to Robert's Steel Parts in E7-25A. Robert feels like he's in a giant squeeze play: The
automotive manufacturers are demanding lower prices, and the steel producers have increased
raw material costs. Robert's contribution margin has shrunk to 60% of revenues. The company's
monthly operating income, prior to these

Vintage Carriage Company offers guided horse-drawn carriage rides through historic Camden,
South Carolina. The carriage business is highly regulated by the city. Vintage Carriage Company
has the following operating costs during April: Monthly depreciation expense on carriages and
stable ...............................

Murphy's Foods produces frozen meals, which it sells for $7 each. The company uses the FIFO
inventory costing method, and it computes a new monthly fixed manufacturing overhead rate
based on the actual number of meals produced that month. All costs and production levels are
exactly as planned. The following data are fr

See Full Question And Answer at solutionrank.com

Bangor Medical Supplies is a retailer of home medical equipment. Last year, Bangor's sales
revenues totaled $6,200,000. Total expenses were $2,500,000. Of this amount, approximately
$1,612,000 was variable, while the remainder was fixed. Since Bangor offers thousands of
different products, its managers prefer to calcul

The budgets of four companies yield the following information: Requirements 1. Fill in the
blanks for each company. 2. Compute breakeven, in sales dollars, for each company. Which
company has the lowest breakeven point in sales dollars? What causes the low breakeven point?

Colton Dry Cleaners has determined the following about its costs: Total variable expenses are
$42,000, total fixed expenses are $30,000, and the sales revenue needed to break even is
$50,000. Determine the company's current 1) sales revenue and 2) operating income.

Caesars Palace® Las Vegas made headlines when it undertook a $75 million renovation. In
mid-September 2015, the hotel closed its then-named Roman Tower, which was last updated in
2001, and started a major renovation of the 567 rooms housed in that tower. On January 1, 2016,
the newly renamed Julius Tower reopened, rep

Comfy Seating Company is currently selling 3,500 oversized bean bag chairs a month at a price
of $100 per chair. The variable cost of each chair sold includes $60 to purchase the bean bag
chairs from suppliers and a $4 sales commission. Fixed costs are $6,000 per month. The
company is considering making several operat

See Full Question And Answer at solutionrank.com

A traveling production of Wicked performs each year. The average show sells 1,400 tickets at
$55 a ticket. There are 125 shows each year. The show has a cast of 45, each earning an average
of $310 per show. The cast is paid only after each show. The other variable expense is program
printing costs of $8 per guest. Annu

Robert's Steel Parts produces parts for the automobile industry. The company has monthly fixed
expenses of $720,000 and a contribution margin of 90% of revenues. Requirements 1. Compute
Robert's Steel Parts' monthly breakeven sales in dollars. 2. Use the contribution margin ratio to
project operating income (or loss

The Willowick Ice Cream Shoppe sold 8,700 servings of ice cream during June for $3 per
serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company.
Each tub costs the shop $12 and has enough ice cream to fill 30 ice cream cones. The shop
purchases the ice cream cones for $0.25 each from a

Horner Work Wear, Inc., supplies uniforms for a variety of businesses. Collin Hoffman is a new
intern in the Accounting Department at Horner. To expand sales, the company is considering
paying commissions to its sales force. The controller, John Wallace, asks Collin to complete an
analysis assuming sales would increase

Sunflower Company manufactures and sells a single product. The company's sales and expenses
for last year follow: Requirements 1. Fill in the missing numbers in the preceding table. Use the
following questions to help fill in the missing numbers in the table: a. What is the total
contribution margin? b. What is the

See Full Question And Answer at solutionrank.com

Shannon's Towing Service has a monthly target operating income of $15,000. Variable expenses
are 70% of sales, and monthly fixed expenses are $12,000. Requirements 1. Compute the
monthly margin of safety in dollars if the shop achieves its income goal. 2. Express Shannon's
margin of safety as a percentage of target

Oleg's Steel Parts produces parts for the automobile industry. The company has monthly fixed
expenses of $750,000 and a contribution margin of 75% of revenues. Requirements 1. Compute
Oleg's Steel Parts' monthly breakeven sales in dollars. 2. Project operating income (or loss) if
revenues are $550,000 and if they ar

Socks Incorporated produces sports socks. The company has fixed expenses of $100,000 and
variable expenses of $1.00 per package. Each package sells for $2.00. Requirements 1. Compute
the contribution margin per package and the contribution margin ratio. 2. Find the breakeven
point in units and in dollars. 3. Find t

Use the information from the Fun Time Cruiseline Data Set to compute the following: a. What is
the contribution margin per passenger? b. What is the contribution margin ratio? c. Use the unit
contribution margin to project operating income if monthly sales total 17,000 passengers. d. Use
the contribution margin rat

Hopper Travel uses the contribution margin income statement internally. Hopper's second-
quarter results are as follows: Hopper's relevant range is sales of between $100,000 and
$640,000. Requirements 1. Prepare contribution margin income statements at sales levels of
$200,000 and $420,000. 2. Compute breakeven sal

See Full Question And Answer at solutionrank.com

Consider Storage Solutions from S8-9. Assume that demand for Regular bins is limited to 36,000
units and demand for large bins is limited to 25,000 units. In S8-9
________________________________________________Regular ____ Large Sales price per
unit ................................................................ $

Choose a company with which you are familiar that manufactures a product or provides a
service. In this activity, you will be making reasonable estimates of the costs and activities
associated with this company; companies do not typically publish internal cost or process
information. 1. Describe the company you selec

Fanfare Products, Inc., is a manufacturer of mobile devices. Kyle is the plant manager at
Fanfare's Toledo, Ohio, plant. The Toledo plant manufactures a smart phone, the Zoom, which
has sold well for the past six months. Kyle is being considered for promotion to manager of the
entire West Coast division of Fanfare Prod

Gamma Manufacturing manufactures 256GB SD cards (memory cards for mobile phones, digital
cameras, and other devices). Price and cost data for a relevant range extending to 200,000 units
per month are as follows: Sales price per unit (current monthly sales volume is 100,000
units) ........ $ 25.00 Variable costs per u

Popped is a specialty popcorn store. It offers two varieties of popcorn: plain and flavored. The
flavors range from Caramel Popcorn to Dark Chocolate Drizzled Popcorn to White Cheddar
Popcorn. The plain popcorn sells for $2 per box and costs $0.80 per box to make. The flavored
popcorn sells for $4 per box and costs $2.

See Full Question And Answer at solutionrank.com

Owner Yang Wong is considering franchising her Noodle Time restaurant concept. She believes
people will pay $6.50 for a large bowl of noodles. Variable costs are $1.95 a bowl. Wong
estimates monthly fixed costs for franchisees at $8,400. Requirements 1. Find a franchisee's
breakeven sales in dollars. 2. Is franchisi

Watson Industries is in the process of analyzing its manufacturing overhead costs. Management
is not sure if the number of units produced or the number of direct labor (DL) hours is the best
cost driver to use for predicting manufacturing overhead (MOH) costs. The following
information is available: Requirements 1. A

Terry's Towing Service has a monthly target operating income of $30,000. Variable expenses are
40% of sales, and monthly fixed expenses are $7,500. Requirements 1. Compute the monthly
margin of safety in dollars if the shop achieves its income goal. 2. Express Terry's margin of
safety as a percentage of target sales

The annual data that follow pertain to Aquatic Optics, a manufacturer of swimming goggles (the
company has no beginning inventory): Sales
price ............................................................................... $ 47 Variable manufacturing expense per
unit ............................... $ 16 Sales commi

Sandy Dawson is the Chief Operating Officer at Mercy Hospital in Atlanta, Georgia. She is
analyzing the hospital's overhead costs but is not sure whether nursing hours or the number of
patient days would be the best cost driver to use for predicting the hospital's overhead. She has
gathered the following information fo

See Full Question And Answer at solutionrank.com

Vicki sells authentic Amish quilts on her website. Suppose Vicki expects to sell 1,000 quilts
during the coming year. Her average sales price per quilt is $250, and her average cost per quilt
is $150. Her fixed expenses total $50,000. Compute her margin of safety a. In units (quilts). b. In
sales dollars. c. As a pe

Whoosh Calendars imprints calendars with college names. The company has fixed expenses of
$1,095,000 each month plus variable expenses of $6.50 per carton of calendars. Of the variable
expenses, 68% is cost of goods sold, while the remaining 32% relates to variable operating
expenses. The company sells each carton of c

The contribution margin income statement of Liberty Coffee for July follows: Liberty Coffee
sells three small coffees for every large coffee. A small coffee sells for $3.00, with a variable
expense of $1.50. A large coffee sells for $5.00, with a variable expense of $2.50. Requirements
1. Determine the coffee shop's

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and
variable expenses of $1.20 per package. Each package sells for $2.00. Requirements 1. Compute
the contribution margin per package and the contribution margin ratio. 2. Find the breakeven
point in units and in dollars. 3. Find the n

DoubleTyme Investors is opening an office in Jeffersonville, Indiana. Fixed monthly expenses

are office rent ($2,300), depreciation on office furniture ($300), utilities ($250), special
telephone lines ($660), a subscription to an online brokerage service ($690), and the salary of a
financial planner ($7,800). Variable
See Full Question And Answer at solutionrank.com

Dunlap Garage Doors manufactures a premium garage door. Currently, the price and cost data
associated with the premium garage door are as follows: Average selling price per premium
garage door ................................. $ 2,200 Average variable manufacturing cost per
door ......................................

Myer Food in Bowling Green, Kentucky, manufactures and markets snack foods. Mila Giles
manages the company's fleet of 220 delivery trucks. Giles has been charged with "reengineering"
the fleet-management function. She has an important decision to make. • Should she continue
to manage the fleet in-house with the five

Squire Manufacturing manufactures a single product that it will sell for $77 per unit. The
company is looking to project its operating income for its first two years of operations. Cost
information for the single unit of its product is as follows: • Direct material per unit produced
$37 • Direct labor cost per u

Brewer Industries is planning on purchasing a new piece of equipment that will increase the
quality of its production. It hopes the increased quality will generate more sales. The company's
contribution margin ratio is 40%, and its current breakeven point is $250,000 in sales revenue. If
the company's fixed expenses in

Toyz Quadcopters plans to sell a standard quadcopter (toy drone) for $45 and a deluxe
quadcopter for $55. Toyz purchases the standard quadcopter for $25 and the deluxe quadcopter
for $35. Management expects to sell two deluxe quadcopters for every three standard
quadcopters. The company's monthly fixed expenses are $19

See Full Question And Answer at solutionrank.com

Use the information from the Fun Time Cruiseline Data Set to compute the number of dinner
cruise tickets it must sell to breakeven and the sales dollars needed to breakeven. Fun Time
Cruiseline Data Set FunTime Cruiseline offers nightly dinner cruises departing from several
cities on the eastern coast of the United S

Caesar Entertainment Corporation's Form 10-K contains a variety of data in addition to financial
statements. Below is a list that contains Caesars' food and beverage costs (adapted) taken from its
Statements of Operations for the past 22 years. In addition, the number of hotel rooms and suites
owned by Caesars at the e

Refer to Socks Unlimited in E7-21A. If the company can decrease its variable costs to $1.00 per
package by increasing its fixed costs to $100,000, how many packages will it have to sell to
generate $22,000 of operating income? Is this more or less than before? Why? In E7-21A Socks
Unlimited produces sports socks. The
Louis Becker is the Chief Operating Officer at Union Hospital in Newark, New Jersey. She is
analyzing the hospital's overhead costs but is not sure whether nursing hours or the number of
patient days would be the best cost driver to use for predicting the hospital's overhead. She has
gathered the following information

Use the data from S7-15 to compute Vicki's operating leverage factor at an expected sales level
of 1,000 quilts. If sales volume increases 20%, by what percentage will her operating income
change? Prove your answer by calculating operating income at a sales volume of 1,000 and a
sales volume of 1,200.

See Full Question And Answer at solutionrank.com

Mary Walker sells homemade knit scarves for $25 each at local craft shows. Her contribution
margin ratio is 60%. Currently, the craft show entrance fees cost Mary $1,500 per year. The craft
shows are raising their entrance fees by 25% next year. How many extra scarves will Mary have
to sell next year just to pay for ri

Eduardo Industries is planning on purchasing a new piece of equipment that will increase the
quality of its production. It hopes the increased quality will generate more sales. The company's
contribution margin ratio is 40%, and its current breakeven point is $350,000 in sales revenue. If
the company's fixed expenses i

Marcus Allen is evaluating a business opportunity to sell premium car wax at vintage car shows.
The wax is sold in 64-ounce tubs. Marcus can buy the premium wax at a wholesale cost of $29
per tub. He plans to sell the premium wax for $84 per tub. He estimates fixed costs such as travel
costs, booth rental cost, and lod

Spirit Calendars imprints calendars with college names. The company has fixed expenses of
$1,095,000 each month plus variable expenses of $4.00 per carton of calendars. Of the variable
expenses, 73% is cost of goods sold, while the remaining 27% relates to variable operating
expenses. The company sells each carton of c

Douglas Dry Cleaners has determined the following about its costs: Total variable expenses are
$30,000, total fixed expenses are $28,000, and the sales revenue needed to break even is
$35,000. Determine the company's current 1) sales revenue and 2) operating income

See Full Question And Answer at solutionrank.com

Refer to the Montrose Oil and Lube data in S6-7. Use the high-low method to determine the
variable and fixed cost components of Montrose Oil and Lube's operating costs. Use this
information to project the monthly operating costs for a month in which the company performs
3,400 oil changes. Montrose Oil and Lube data in
Pursell Industries is in the process of analyzing its manufacturing overhead costs. Management is
not sure if the number of units produced or number of direct labor (DL) hours is the best cost
driver to use for predicting manufacturing overhead (MOH) costs. The following information is
available: Requirements 1. Are

Owner Yuning Zhu is considering franchising her Oodles of Noodles restaurant concept. She
believes people will pay $7.00 for a large bowl of noodles. Variable costs are $2.45 a bowl. Zhu
estimates monthly fixed costs for franchisees at $7,800. Requirements 1. Find a franchisee's
breakeven sales in dollars. 2. Is fra

Jamison Travel uses the contribution margin income statement internally. Jamison's first quarter
results are as follows: Jamison's relevant range is sales of between $120,000 and $630,000.
Requirements 1. Prepare contribution margin income statements at sales levels of $230,000 and
$400,000. 2. Compute breakeven s

Mario's Foods produces frozen meals, which it sells for $8 each. The company uses the FIFO
inventory costing method, and it computes a new monthly fixed manufacturing overhead rate
based on the actual number of meals produced that month. All costs and production levels are
exactly as planned. The following data are fro

See Full Question And Answer at solutionrank.com

Mogadore Manufacturing had a 1.25 operating leverage factor when sales were $60,000. The
company's contribution margin ratio was 25%. What were the company's fixed expenses?

The Edgewater Ice Cream Shoppe sold 8,900 servings of ice cream during June for $4 per
serving. The shop purchases the ice cream in large tubs from the Premium Ice Cream Company.
Each tub costs the shop $15 and has enough ice cream to fill 30 ice cream cones. The shop
purchases the ice cream cones for $0.10 each from a

Refer to Noodle Time in E7-23A. Wong did franchise her restaurant concept. Because of Noodle
Time's success, Noodles 'n More has come on the scene as a competitor. To maintain its market
share, Noodle Time will have to lower its sales price to $6.00 per bowl. At the same time,
Noodle Time hopes to increase each restaur

Debbie DeLozier sells homemade knit scarves for $15 each at local craft shows. Her contribution
margin ratio is 60%. Currently, the craft show entrance fees cost Debbie $900 per year. The craft
shows are raising their entrance fees by 10% next year. How many extra scarves will Debbie
have to sell next year just to pay

Goose down is used in a wide variety of products, including jackets, bedding, and pillows. In
recent years, the cost of down has been increasing. For example, in 2009, a pound of goose down
sold for $10; in 2014 it sold for $50.5 Lands' End, a retailer of clothing and bedding items, uses
goose down in many of its produ
See Full Question And Answer at solutionrank.com

A traveling production of Grease performs each year. The average show sells 1,400 tickets at
$50 per ticket. There are 100 shows a year. The show has a cast of 40, each earning an average
of $340 per show. The cast is paid only after each show. The other variable expense is program
printing expenses of $8 per guest. An

The contribution margin income statement of Morgantown Coffee for October follows:
Morgantown Coffee sells three small coffees for every large coffee. A small coffee sells for
$2.00, with a variable expense of $1.00. A large coffee sells for $4.00, with a variable expense of
$2.00. Requirements 1. Determine the coff

Jake Spahr is evaluating a business opportunity to sell premium car wax at vintage car shows.
The wax is sold in 64-ounce tubs. Jake can buy the premium wax at a wholesale cost of $32 per
tub. He plans to sell the premium wax for $62 per tub. He estimates fixed costs such as travel
costs, booth rental cost, and lodging

Use the information from the Fun Time Cruiseline Data Set. a. Compute the operating leverage
factor when Fun Time Cruiseline sells 12,000 dinner cruises. b. If volume increases by 6%, by
what percentage will operating income increase? c. If volume decreases by 2%, by what
percentage will operating income decrease?

Refer to Oleg's Steel Parts in E7-46B. Oleg feels like he's in a giant squeeze play: The
automotive manufacturers are demanding lower prices, and the steel producers have increased
raw material costs. Oleg's contribution margin has shrunk to 45% of revenues. Oleg's monthly
operating income, prior to these pressures, wa

See Full Question And Answer at solutionrank.com

Refer to Socks Incorporated in E7-42B. If Socks Incorporated can decrease its variable costs to
$0.80 per package by increasing its fixed costs to $125,000, how many packages will it have to
sell to generate $23,000 of operating income? Is this more or less than before? Why? In E7-42B
Socks Incorporated produces spor

Funtime Quadcopters plans to sell a standard quadcopter (toy drone) for $55 and a deluxe
quadcopter for $85. Funtime purchases the standard quadcopter for $45 and the deluxe
quadcopter for $65. Management expects to sell two deluxe quadcopters for every three standard
quadcopters. The company's monthly fixed expenses a

Use the information from the Fun Time Cruiseline Data Set. 1. Suppose Fun Time Cruiseline
cuts its dinner cruise ticket price from $50 to $45 to increase the number of passengers. Compute
the new breakeven point in units and in sales dollars. Explain how changes in sales price
generally affect the breakeven point. 2
Use the information from the Fun Time Cruiseline Data Set. If Fun Time Cruiseline sells an
additional 700 tickets, by what amount will its operating income increase (or operating loss
decrease)? Fun Time Cruiseline Data Set FunTime Cruiseline offers nightly dinner cruises
departing from several cities on the eastern

World Strings produces student-grade violins for beginning violin students. The company
produced 2,700 violins in its first month of operations. At month end, 800 finished violins
remained unsold. There was no inventory in work in process. Violins were sold for $120.00
each. Total costs from the month are as follows:

See Full Question And Answer at solutionrank.com

The Glow Factory plans to open a new retail store in Racine, Wisconsin. The store will sell
specialty candles for an average of $25 each. The average variable costs per candle are as
follows: • Wax $8 • Other additives $3 • Base $2 The company is negotiating its lease
for the new location. The landlord has of

Brimfield Catering uses the high-low method to predict its total overhead costs. Past records
show that total overhead cost was $25,600 when 860 hours were worked and $27,800 when 960
hours were worked. If Brimfield Catering has 885 hours scheduled for next month, what is the
expected total overhead cost for next month

Mast Truck Accessories has an inventory of 485 obsolete remote entry keys that are carried in
inventory at a manufacturing cost of $75,175. Production Supervisor Carla Lewis must decide to
do one of the following: • Process the inventory further at a cost of $30,000, with the
expectation of selling it for $31,000.

Use the information from the Fun Time Cruiseline Data Set. Suppose Fun Time Cruiseline
decides to offer two types of dinner cruises: regular cruises and executive cruises. The executive
cruise includes complimentary cocktails and a five-course dinner on the upper deck. Assume that
fixed expenses remain at $210,000 per

Ruby Company manufactures and sells a single product. The company's sales and expenses for
last year follow: Requirements 1. Fill in the missing numbers in the preceding table. Use the
following questions to help fill in the missing numbers in the table: a. What is the total
contribution margin? b. What is the tota

See Full Question And Answer at solutionrank.com

Rathke Industries manufactures and sells a single product. The controller has prepared the
following income statement for the most recent year: The company produced 14,000 units and
sold 8,500 units during the year ending December 31. Fixed manufacturing overhead (MOH) for
the year was $266,000, while fixed operating
The Golden Candle Company plans to open a new retail store in Lewiston, Maine. The store will
sell specialty candles for an average of $15 each. The average variable costs per candle are as
follows: • Wax $4 • Other additives $2 • Base $1 The company is negotiating its lease
for the new location. The landlord

Value Strings produces student-grade violins for beginning violin students. The company
produced 2,500 violins in its first month of operations. At month end, 750 finished violins
remained unsold. There was no inventory in work in process. Violins were sold for $122.50
each. Total costs from the month are as follows:

The Ohio State Fair is one of the largest state fairs in the United States. It draws nearly one
million visitors over the twelve-day period each July and August. The fair is a nonprofit
organization. It is self-supporting and needs, at a minimum, to break even by generating
revenues through various activities. Among t

Use the information from the Fun Time Cruiseline Data Set. If Fun Time Cruiseline has a target
operating income of $30,000 per month, how many dinner cruise tickets must the company sell?
Fun Time Cruiseline Data Set FunTime Cruiseline offers nightly dinner cruises departing from
several cities on the eastern coast o

See Full Question And Answer at solutionrank.com

Angel Rain Gear sells monogrammed umbrellas on Etsy. Angel Rain Gear is currently selling
2,000 umbrellas a month at a price of $25 per umbrella. The variable cost of each umbrella sold
includes $10 to purchase the merchandise from suppliers and a $3 commission paid to Etsy.
Fixed costs are $2,500 per month. The compan

Montrose Oil and Lube is a car care center specializing in ten-minute oil changes. Montrose Oil
and Lube has two service bays, which limits its capacity to 4,000 oil changes per month. The
following information was collected over the past six months: 1. Prepare a scatter plot graphing
the volume of oil changes (x-axis

Use the information from the Fun Time Cruiseline Data Set. Suppose Fun Time Cruiseline
embarks on a cost reduction drive and slashes fixed expenses from $210,000 per month to
$150,000 per month. 1. Compute the new breakeven point in units and in sales dollars. 2. Is the
breakeven point higher or lower than in S7-3? E

Profit Lin Corporation has a single product whose selling price is $120 and whose variable
expense is $80 per unit. The company’s monthly fixed expense is $50,000. Required: 1.
Using the equation method, solve for the unit sales that are required to earn a target profit of
$10,000. 2. Using the formula method, solv

Cost Structure to erratic sales of its sole product—a high-capacity battery for laptop
computers—PEM, Inc., has been experiencing difficulty for some time. The company’s
contribution format income statement for the most recent month is given below: Required: 1.
Compute the company’s CM ratio and its break-ev

See Full Question And Answer at solutionrank.com

In what fundamental ways does activity-based costing differ from traditional costing methods
such as those described?

If the units produced exceed unit sales, which method would you expect to show the higher net
operating income, variable costing or absorption costing? Why?

These statements can’t be right, said Ben Yoder, president of Rayco, Inc. “Our sales in the
second quarter were up by 25% over the first quarter, yet these income statements show a
precipitous drop in net operating income for the second quarter. Those accounting people have
fouled something up.” Mr. Yoder was ref

The questions in this exercise are based on the Benetton Group, a company headquartered in
Italy and known in the United States primarily for one of its brands of fashion apparel—United
Colors of Benetton. To answer the questions, you will need to download the Benetton
Group’s 2004 Annual Report at www.benetton.com

Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total van-
able expenses were $120,000, and fixed expenses were $65,000. Required: 1. What is the
company’s contribution margin (CM) ratio? 2. Estimate the change in the company’s net
operating income if it were to increase its

See Full Question And Answer at solutionrank.com

What is the basic difference between absorption costing and variable costing?

What are the arguments in favor of treating fixed manufacturing overhead costs as product costs?

Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a
standard cutlery set and a deluxe set and sells them to retail department stores throughout the
country. The standard set sells for $60, and the deluxe set sells for $75. The variable expenses
associated with each set are given

Whitman Company has just completed its first year of operations. The company’s absorption
costing income statement for the year appears below: The company’s selling and
administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit sold in
variable expenses. The $16 per unit product cost gi

Absorption Costing Unit Product Cost and Income Statement Refer to the data in Exercise 7—8
for Chuck Wagon Grills. Assume in this exercise that the company uses absorption costing.
Required: 1. Compute the unit product cost for one barbecue grill. 2. Prepare an income
statement.

See Full Question And Answer at solutionrank.com

Profit Lin Corporation has a single product whose selling price is $120 and whose variable
expense is $80 per unit. The company’s monthly fixed expense is $50,000. Required: 1.
Using the equation method, solve for the unit sales that are required to earn a target profit of
$10,000. 2. Using the formula method, solv

Company manufactures and sells a single product. Cost data for the product are given below:>
The product sells for $60 per unit. Production and sales data for July and August, the first two
months of operations, follow> The company’s Accounting Department has prepared
absorption costing income statements for July a

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning
of the year. Getting the company through its first quarter of operations placed a considerable
strain on Ms. Tyler’s personal finances. The following income statement for the first quarter
was prepared by a friend who has just

Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The
company’s activity-based costing system has four activity cost pools, which are listed below
along with their activity measures and activity rates: The company just completed a single order
from Interstate Trucking for 1,0

During Heaton Company’s first two years of operations, the company reported absorption
costing net operating income as follows: The company’s $18 unit product cost is computed
as follows:br> Forty percent of fixed manufacturing overhead consists of wages and salaries; the
remainder consists of depreciation c

See Full Question And Answer at solutionrank.com

This question should be answered only after Research and Application 5—20 are
completed.Required:1. Referring to the data for Blue Nile in Research and Application 5-20 and
the data on net sales available on the company’s website, estimate the variable and fixed
components of the company’s quarterly selling, gene

Java Source, Inc. (JSI), is a processor and distributor of a variety of blends of coffee. The
company buys coffee beans from around the world and roasts, blends, and packages them for
resale. JSI offers a large variety of different coffees that it sells to gourmet shops in one-pound
bags. The major cost of the coffee i

Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Morton
Company’s contribution format income statement for last month is given below: The
industry in which Morton Company operates is quite sensitive to cyclical movements in the
economy. Thus, profits vary considerably from year to

Why is top management support crucial when attempting to implement an activity-based costing
system?

Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games last year
at a selling price of $20 per game. Fixed costs associated with the game total $182,000 per year,
and variable costs are $6 per game. Production of the game is entrusted to a printing contractor.
Variable costs consist mostly o

See Full Question And Answer at solutionrank.com

A CVP graph such as the one shown below is a useful technique for showing relationships
among an organization’s costs, volume, and profits. Required: 1. Identify the numbered
components in the CVP graph. 2. State the effect of each of the following actions on line 3, line
9, and the break-even point. For line 3 a

In all respects, Company A and Company B are identical except that Company A’s costs are
mostly variable, whereas Company B’s costs are mostly fixed, When sales increase, which
Company will tend to realize the greatest increase in profits? Explain.

Explain how fixed manufacturing overhead Costs are shifted from one period to another under
absorption costing.

How can the activity rates (i.e., cost per activity) for the various activities be used to target
process improvements?

Various activities at Ming Corporation, a manufacturing company, are listed below. Each
activity has been classified as a unit-level, batch-level, product-level, or customer-level activity.
Required: Complete the table by providing an example of an activity measure for eachactivity.

See Full Question And Answer at solutionrank.com

Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of
marketing at Piedmont Fasteners Corporation: “Wes, I’m not sure how to go about
answering the questions that came up at the meeting with the president yesterday:’
“What’s the problem?” “The president wanted to know the

How does Lean Production reduce or eliminate the difference in reported net operating income
between absorption and variable costing?

Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present
revenue, cost, and sales data for the two products follow: Fixed expenses total $475,800 per
year. The Republic of Palau uses the U.S. dollar as its currency. Required: 1. Assuming the sales
mix given above, do the follow

Outback Outfitters sells recreational equipment. One of the company’s products, a small
camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses
associated with the stove total $108,000 per month. Required: 1. Compute the break-even point
in number of stoves and in total sales do

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the
island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument
called a gamelan that is similar to a xylophone. The sounding bars are cast from brass and hand-
filed to attain just the right sound. The

See Full Question And Answer at solutionrank.com

Klumper Corporation is a diversified manufacturer of industrial goods. The company’s

activity- based costing system contains the following six activity cost pools and activity rates:
Activity data have been supplied for the following two products: Required: Determine the total
overhead cost that would be assigned t

Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in
applications ranging from the cutting edges of bulldozer blades to replacement parts for Land
Rovers. The company uses an activity-based costing system for internal decision-making
purposes. The company has four activity co

The Fashion Shoe Company operates a chain of women’s shoe shops around the country.
The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the
shops are paid a substantial commission on each pair of shoes sold (in addition to a small basic
salary) in order to encourage them to be

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it
sells for $210. Data for last year’s operations follow: Required: 1. Assume that the company
uses variable costing. Compute the unit product cost for one barbecue grill. 2. Assume that the
company uses variable costing.

Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The
company has a standard paraglider model, but also makes custom-designed paragliders.
Management has designed an activity-based costing system with the following activity cost pools
and activity rates: Management would like an

See Full Question And Answer at solutionrank.com

Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit
and has a CM ratio of 30%. The company’s fixed expenses are $180,000 per year. The
company plans to sell 16,000 units this year. Required: 1. What are the variable expenses per
unit? 2. Using the equation method:

Sierra Company incurs the following costs to produce and sell a single product. During the last
year, 25,000 units were produced and 22,000 units were sold. The Finished Goods inventory
account at the end of the year shows a balance of $72,000 for the 3,000 unsold units. Required;
1. Is the company using absorption c

Are selling and administrative expenses treated as product costs or as period costs under variable
costing?

Company is a small but growing manufacturer of telecommunications equipment. The company

has no sales force of its own; rather, it relies completely on independent sales agents to market its
products. These agents are paid a commission of 15% of selling price for all items sold. Barbara
Cheney, Pittman’s controller,

Engberg Company installs lawn sod in home yards. The company’s most recent monthly
contribution format income statement follows: Required: 1. Compute the company’s degree
of operating leverage. 2. Using the degree of operating leverage, estimate the impact on net
operating income of a 5% increase in sales. 3. V

See Full Question And Answer at solutionrank.com

Why is the first stage of the allocation process in activity-based costing often based on inter-
views?

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit.
Variable costs are $8 per unit, and fixed costs total $180,000 per year. Required: Answer the
following independent questions: 1. What is the product’s CM ratio? 2. Use the CM ratio to
determine the break-even point in s

When activity-based costing is used, why do manufacturing overhead costs often shift from high-
volume products to low-volume products?

Fill in the missing amounts in each of the eight case situations below. Each case is independent
of the others a. Assume that only one product is being sold in each of the four following case
situations: b. Assume that more than one product is being sold in each of the four following
casesituations:

Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate
costs for pricing and other purposes. The proprietor of the company believes that costs are driven
primarily by the size of customer lawns, the size of customer garden beds, the distance to travel
to customers, and the numbe

See Full Question And Answer at solutionrank.com

(This exercise is a continuation of Exercise 8—9; it should be assigned only if Exercise 8—9 is
also assigned.) The manager of the Westfield branch of Security Home Bank has provided the
following data concerning the transactions of the branch during the past year: The lowest costs
reported by other branches for t

Karlik Enterprises distributes a single product whose selling price is $24 and whose variable
expense is $18 per unit. The company’s monthly fixed expense is $24,000. Required: 1.
Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units. 2. Estimate
the company’s break-even point in u

Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell
specialty cellular telephones. The division’s monthly costs are shown below: Far North
Telecom regards all of its workers as full-time employees and the company has a long-standing
no layoff policy. Furthermore, production is h

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At
present, the ball is manufactured in a small plant that relies heavily on direct labor workers.
Thus, variable costs are high, totaling $15 per ball, of which 60% is direct labor cost. Last year,
the company sold 30,000 of these b

Olongapo Sports Corporation is the distributor in the Philippines of two premium golf
balls—the Flight Dynamic and the Sure Shot. Monthly sales, expressed in pesos (P), and the
contribution margin ratios for the two products follow: Fixed expenses total P183,750 per month.
Required: 1. Prepare a contribution format

See Full Question And Answer at solutionrank.com

Hokuriku-Seika Co., Ltd., of Yokohama, Japan, is a subcontractor to local manufacturing

companies. The company specializes in precision metal cutting using focused high-pressure
water jets and high-energy lasers. The company has a traditional job-order costing system in
which direct labor and direct materials costs are

If fixed manufacturing overhead costs are released from inventory under absorption costing,
what does this tell you about the level of production in relation to the level of sales?

Whirly Corporation’s most recent income statement is shown below: Required: Prepare a
new contribution format income statement under each of the following conditions (consider each
case independently): 1. The sales volume increases by 100 units. 2. The sales volume decreases
by 100 units. 3. The sales volume is 9

Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The
company uses variable costing for internal management reports and absorption costing for
external reports to shareholders, creditors, and the government. The company has provided the
following data: The company’s fixed
Pixel Studio, Inc., is a small company that creates computer-generated animations for films and
television. Much of the company’s work consists of short commercials for television, but the
company also does realistic computer animations for special effects in movies. The young
founders of the company have become incr

See Full Question And Answer at solutionrank.com

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution
format income statement for a recent month for the two games appears on the following page:
Required: 1. Compute the overall contribution margin (CM) ratio for the company. 2. Compute
the overall break-even point for the company in

What are unit-level, batch-level, product-level, customer-level, and organization-sustaining

activities?

This makes no sense at all, said Bill Sharp, president of Essex Company. “We sold the same
number of units this year as we did last year, yet our profits have more than doubled. Who made
the goof—the computer or the people who operate it?” The statements to which Mr. Sharp
was referring are shown below (absorptio

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana.
For its services, the company has always charged a flat fee per hundred square feet of carpet
cleaned. The current fee is $28 per hundred square feet. However, there is some question about
whether the company is actually makin

Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder.
Data concerning these two product lines appear below: The company has a traditional costing
system in which manufacturing overhead is applied to units based on direct labor-hours. Data
concerning manufacturing overhead and direct l

See Full Question And Answer at solutionrank.com

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three
varieties of rice—Fragrant, White, and Loonzain. (The currency in Thailand is the baht. which
is denoted by B.) Budgeted sales by product and in total for the coming month are shown below:
As shown by these data, net oper

What types of costs should not be assigned to products in an activity-based costing system?

What is meant by the term operating leverage?

The questions below pertain to two different scenarios involving a manufacturing company. In
each scenario, the cost structure of the company is constant from year to year. Selling prices, unit
variable costs, and total fixed costs are the same in every year. However, unit sales and/or unit
production levels may vary f
What is meant by a product’s contribution margin ratio? How is this ratio useful in planning
business operations?

See Full Question And Answer at solutionrank.com

The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee
has assembled the following expected costs for the event: The committee members would like to
charge $35 per person for the evening’s activities. Required: 1. Compute the break-even
point for the dinner-dance (in terms of th

Explain how a shift in the sales mix could result in both a higher break-even point and a lower
net income.

Menlo Company distributes a single product. The company’s sales and expenses for last
month follow: Required: 1. What is the monthly break-even point in units sold and in sales
dollars? 2. Without resorting to computations, what is the total contribution margin at the break-
even point? 3. How many units would hav

Advanced Products Corporation has supplied the following data from its activity-based costing
system: During the year, Advanced Products completed one order for a new customer, Shenzhen
Enterprises. This customer did not order any other products during the year. Data concerning that
order follow: Required: 1. Usi

Lynch Company manufactures and sells a single product. The following costs were incurred
during the company’s first year of operations: During the year, the company produced
25,000 units and 20,000 sold company’s product is $50 per unit. Required: 1. Assume that
the company uses absorption costing: a. Comp

See Full Question And Answer at solutionrank.com

Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner
of the restaurant has been trying to better understand costs at the restaurant and has hired a
student intern to conduct an activity-based costing study. The intern, in consultation with the
owner, identified three major activit

Guochang Li was hired as chief executive officer (CEO) in late November by the board of
directors of ContactGlobal, a company that produces an advanced global positioning system
(GPS) device. The previous CEO had been fired by the board of directors due to a series of
shady business practices including shipping defecti

Variable Costing Income Statement; Explanation of Difference in Net Operating Income Refer to
the data in Exercise 7—1 for Ida Sidha Karya Company. The absorption costing income
statement prepared by the company’s accountant for last year appears below (all currency
values are in thousands of rupiahs): Required: 1

Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of
Difference in Net Operating Income High Country, Inc., produces and sells many recreational
products. The company has just opened a new plant to produce a folding camp cot that will be
marketed throughout the United States. The fol

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the
Los Angeles area. The company is implementing an activity-based costing system that has four
activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity
measures are miles for the Travel cost po

See Full Question And Answer at solutionrank.com

Model X100 sells for $120 per unit whereas Model X200 offers advanced features and sells for
S500 per unit. Management expects to sell 50,000 units of Model X100 and 5,000 units of Model
X200 next year. The direct material cost per unit is $50 for Model X100 and $220 for Model
X200. The company’s total manufacturing

Why is direct labor a poor base for allocating overhead in many companies?

Parker Products Joe, a manufacturer, reported $123 million in sales and a loss of $18 million in
its annual report to shareholders. According to a CVP analysis prepared for management, the
company’s break-even point is $115 million in sales. Required: Assuming that the CVP
analysis is correct, is it likely that the c

The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is
thinking of expanding his sales by hiring local high school students, on a commission basis, to
sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would
have to be ordered from the manu

Prepare and Interpret Income Statements; Changes in Both Sales and Production; Lean
Production Starfax, Inc., manufactures a small part that is ‘widely used in various electronic
products such as home computers. Operating results for the first three years of activity were as
follows (absorption costing basis): In th

See Full Question And Answer at solutionrank.com

Miller Company’s most recent contribution format income statement is shown below:
Required: Prepare a new contribution format income statement under each of the following
conditions (consider each case independently): 1. The number of units sold increases by 15%. 2.
The selling price decreases by $1.50 per unit, a

What are the arguments in favor of treating fixed manufacturing overhead costs as period costs?
Why is the activity-based costing described in this chapter unacceptable for external financial
reports?

Under absorption costing, how is it possible to increase net operating income without increasing
sales?

If the units produced and unit sales are equal, which method would you expect to show the
higher net operating income, variable costing or absorption costing? Why?

See Full Question And Answer at solutionrank.com

The following activities occur at Greenwich Corporation, a company that manufactures a variety
of products. a. Receive raw materials from suppliers. b. Manage parts inventories. c. Do rough
milling work on products. d. Interview and process new employees in the personnel department.
e. Design new products. f. Perform p

Changes in Fixed and Variable Costs; Target Profit and Break-Even Analysis Neptune Company
produces toys and other items for use in beach and resort areas. A small, inflatable toy has come
onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per
unit. Enough capacity exists in t

The operations vice president of Security Home Bank has been interested in investigating the
efficiency of the bank’s operations. She has been particularly concerned about the costs of
handling routine transactions at the bank and would like to compare these costs at the bank’s
various branches. If the branches wit

Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two
products follow: Additional information about the company follows: a. Hubs require $32 in
direct materials per unit, and Sprockets require $18. b. The direct labor wage rate is $15 per
hour. c. Hubs are more complex to manufactu

Minden Company introduced a new product last year for which it is trying to find an optimal
selling price. Marketing studies suggest that the company can increase sales by 5,000 units for
each $2 reduction in the selling price. The company’s present selling price is $70 per unit,
and variable expenses are $40 per uni

See Full Question And Answer at solutionrank.com

CD Express, Inc., provides CD duplicating services to software companies. The customer

provides a master CD from which CD Express makes copies. An order from a customer can be
for a single copy or for thousands of copies. Most jobs are broken down into batches to allow
smaller jobs, with higher priorities, to have acce
Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the
next month’s budget appear below: Required: 1. Compute the company’s margin of
safety. 2. Compute the company’s margin of safety as a percentage of itssales.

Data for Hermann Corporation are shown below: Fixed expenses are $30,000 per month and the
company is selling 2,000 units per month. Required: 1. The marketing manager argues that a
$5,000 increase in the monthly advertising budget would increase monthly sales by $9,000.
Should the advertising budget be increased? 2.

Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes
in fashionable sandals. Angie has just received a degree in business and she is anxious to apply
the principles she has learned to her business. In time, she hopes to open a chain of sandal shops.
As a first step, she has p

Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the
production schedule for the last quarter of the year. The Brazilian Division had planned to sell
3,600 units during the year, but by September 30 only the following activity had been reported:
The division can rent warehouse space

See Full Question And Answer at solutionrank.com

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related
products from buildings. There has been a long-simmering dispute between the company’s
estimator and the work supervisors. The on-site supervisors claim that the estimators do not
adequately distinguish between routine work such

In response to a request from your immediate supervisor, you have prepared a CVP graph
portraying the cost and revenue characteristics of your company’s product and operations.
Explain how the lines on the graph and the break-even point would change if (a) The selling
price per unit decreased, (b) Fixed cost incr

Jaffre Enterprises distributes a single product whose selling price is $16 and whose variable
expense is $11 per unit. The company’s fixed expense is $16,000 per month. Required: 1.
Prepare a profit graph for the company up to a sales level of 4,000 units. 2. Estimate the
company’s break-even point in unit sales

During its first year of operations, Sitwell Corporation had the following transactions pertaining
to its common stock. Jan. 10 Issued 80,000 shares for cash at $6 per share. Mar. 1 Issued 5,000
shares to attorneys in payment of a bill for $35,000 for services rendered in helping the company
to incorporate. July 1 Iss

(Issuance and Retirement of Bonds; Income Statement Presentation) Holiday Company issued its
9%, 25-year mortgage bonds in the principal amount of $3,000,000 on January 2, 1996, at a
discount of $150,000, which it proceeded to amortize by charges to expense over the life of the
issue on a straight-line basis. The inden

See Full Question And Answer at solutionrank.com

Stock splits and stock dividends may be used by a corporation to change the number of shares of
its stock outstanding. (a) What is meant by a stock split effected in the form of a dividend? (b)
From an accounting viewpoint, explain how the stock split effected in the form of a dividend
differs from an ordinary stock di

Zucker Inc. uses a fiscal year as the taxable year for filing its Form 1120. a. If Zucker's fiscal
year ends on March 31, what is the filing date and the extended filing date for Zucker's Form
1120 for the fiscal year ending March 31, 2018? b. If Zucker's fiscal year ends on June 30, what
is the filing date and the e

Teller Corporation’s post-closing trial balance at December 31, 2010, was as follows. At
December 31, 2010, Teller had the following number of common and preferred shares. Common
Preferred Authorized 600,000 60,000 Issued 200,000 10,000 Outstanding 190,000 10,000 The
dividends on preferred stock a

Loxley Corporation is authorized to issue 50,000 shares of $10 par value common stock. During
2010, Loxley took part in the following selected transactions. 1. Issued 5,000 shares of stock at
$45 per share, less costs related to the issuance of the stock totaling $7,000. 2. Issued 1,000
shares of stock for land apprais

Arantxa Corporation has outstanding 20,000 shares of $5 par value common stock. On August 1,
2010, Arantxa reacquired 200 shares at $80 per share. On November 1, Arantxa reissued the 200
shares at $70 per share. Arantxa had no previous treasury stock transactions. Prepare
Arantxa’s journal entries to record these tra

See Full Question And Answer at solutionrank.com

Elizabeth Company reported the following amounts in the stockholders’ equity section of its
December 31, 2010, balance sheet. During 2011, Elizabeth took part in the following
transactions concerning stockholders’ equity. 1. Paid the annual 2010 $8 per share dividend
on preferred stock and a $2 per share dividend o

Mr. and Mrs. Wickham did not apply for an extension of time to file their 2016 Form 1040.
Because they were vacationing outside the United States, they neglected to file their Form 1040
until July 14, 2017. Compute the Wickhams' late filing and late payment penalty if: a. Their
Form 1040 showed a $1,160 refund due. b

Mr. Leon filed his 2015 Form 1040 by the April 15, 2016, filing date. In 2018, the IRS issued a
notice of deficiency to Mr. Leon, in which it assessed $7,700 of additional 2015 income tax.
Compute the total amount that Mr. Leon owes to the federal government assuming: a. The
annual interest rate (underpayment rate) th

(Information Related to Various Bond Issues) Pawnee Inc. has issued three types of debt on
January 1, 2010, the start of the company’s fiscal year. (a) $10 million, 10-year, 13%
unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. (b) $25 million par
of 10-year, zero-coupon bonds at a price to

Mrs. Fugate, who is divorced, failed to include $28,000 alimony on her 2016 Form 1040. The
only gross income she reported was her $78,000 salary. She filed her return on January 19, 2017.
a. What is the last date on which the IRS can assess additional tax for 2016? b. Would your
answer change if Mrs. Fugate also repo

See Full Question And Answer at solutionrank.com

(Debtor/Creditor Entries for Modification of Troubled Debt) Vargo Corp. owes $270,000 to First
Trust. The debt is a 10-year, 12% notes due December 31, 2010. Because Vargo Corp. is in
financial trouble, First Trust agrees to extend the maturity date to December 31, 2012, reduce the
principal to $220,000, and reduce the

Explain the difference between the proportional method and the incremental method of
allocating the proceeds of lump-sum sales of capital stock.

LZ Corporation uses a fiscal year ending September 30. The controller filed LZ's Form 1120 for
the year ending September 30, 2018, on October 23, 2018. a. What is the last day on which the
IRS may assess additional tax for this fiscal year? b. How would your answer change if LZ's
return was timely filed on its extend

Use the information from BE15-13, but assume Green Day Corporation declared a 100% stock
dividend rather than a 5% stock dividend. Prepare the journal entries for both the date of
declaration and the date of distribution.

Why is a preemptive right important?

See Full Question And Answer at solutionrank.com

(Debtor/Creditor Entries for Continuation of Troubled Debt) Daniel Perkins is the sole
shareholder of Perkins Inc., which is currently under protection of the U.S. bankruptcy court. As
a “debtor in possession,” he has negotiated the following revised loan agreement with
United Bank. Perkins Inc.’s $600,000, 12%,

(Determine Proper Amounts in Account Balances) Presented below are three independent
situations. (a) Chinook Corporation incurred the following costs in connection with the issuance
of bonds: (1) Printing and engraving costs, $15,000; (2) legal fees, $49,000, and (3) commissions
paid to underwriter, $60,000. What amoun
For what reasons might a corporation purchase its own stock?

Presented below is information from the annual report of Potter Plastics, Inc. (a) Compute the
return on common stock equity and the rate of interest paid on bonds. (Assume balances for debt
and equity accounts approximate averages for the year.) (b) Is Potter Plastics, Inc. trading on the
equity successfully?Explain.

During the audit of Mr. and Mrs. Jessel's 2014 and 2015 tax returns, the revenue agent learned
that they kept two sets of books for their sole proprietorship. A comparison of the two revealed
that Mr. and Mrs. Jessel earned more than $80,000 unreported income. The tax deficiency on the
unreported income was $32,000. a

See Full Question And Answer at solutionrank.com

Where can authoritative iGAAP guidance related to stockholders’ equity are found?

This comment appeared in the annual report of Mac Cloud Inc.: “The Company could pay
cash or property dividends on the Class A common stock without paying cash or property
dividends on the Class B common stock. But if the Company pays any cash or property
dividends on the Class B common stock, it would be required to

(Debtor/Creditor Entries for Continuation of Troubled Debt with New Effective Interest)
Crocker Corp. owes D. Yeager Corp. a 10-year, 10% note in the amount of $330,000 plus
$33,000 of accrued interest. The note is due today, December 31, 2010. Because Crocker Corp.
is in financial trouble, D. Yeager Corp. agrees to fo

(Restructure of Note under Different Circumstances) Halvor Corporation is having financial

difficulty and therefore has asked Frontenac National Bank to restructure its $5 million note
outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%.
The present market rate for a loan of t

(Entries for Bond Transactions) On January 1, 2010, Osborn Company sold 12% bonds having a
maturity value of $800,000 for $860,651.79, which provides the bondholders with a 10% yield.
The bonds are dated January 1, 2010, and mature January 1, 2015, with interest payable
December 31 of each year. Osborn Company allocate

See Full Question And Answer at solutionrank.com

(Entry for Retirement of Bond; Bond Issue Costs) On January 2, 2005, Prebish Corporation
issued $1,500,000 of 10% bonds at 97 due December 31, 2014. Legal and other costs of $24,000
were incurred in connection with the issue. Interest on the bonds is payable annually each
December 31. The $24,000 issue costs are being

Mr. B, a self-employed consultant, charged a client a $15,000 fee plus $3,900 reimbursable
business expenses. The client paid the $18,900 bill and sent a Form 1099 reporting $18,900
income. When Mr. B prepared his Schedule C, he simply reported $15,000 income from the
client. He did not report the $3,900 reimbursement

KP, a calendar year corporation, filed its 2013 return on March 8, 2014. On February 19, 2017, it
filed an amended 2013 return reflecting $2.61 million less taxable income than the original
return and requesting a $913,000 tax refund. Identify the tax issue or issues suggested by the
above situations, and state each i

Mrs. Small had the following items of financial support this year: Social Security
benefits ...................................... $13,670 Pension from her former employer ..........................
10,800 Cash gifts from her grandchildren ........................... 12,000 Mrs. Small's pension was paid
by a qualif

Addison Corporation has ten million shares of common stock issued and outstanding. On June 1
the board of directors voted a 60 cents per share cash dividend to stockholders of record as of
June 14, payable June 30. (a) Prepare the journal entry for each of the dates above assuming the
dividend represents a distribution

See Full Question And Answer at solutionrank.com

Mr. and Mrs. FP bought $500 worth of Girl Scout cookies from their godchild. Because they
don't eat sweets, they gave away every box to various friends and family members. Identify the
tax issue or issues suggested by the above situations, and state each issue in the form of a
question

Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and
60,000 shares of $10 par value common stock. The preferred stock was issued in January 2010,
and no dividends were declared in 2010 or 2011. In 2012, Nottebart declares a cash dividend of
$300,000. How will the dividend be sha

Mr. Tolen made the following interest payments. Determine the extent to which he can deduct
each payment on his Form 1040. a. $4,600 on credit card debt. b. $14,100 on a $210,000
mortgage secured by his vacation home in Key West. Mr. Tolen incurred the mortgage to
purchase this second home. c. $1,300 on a $22,000 un

Wilco Corporation has the following account balances at December 31, 2010. Prepare
Wilco’s December 31, 2010, stockholders’ equitysection.

Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with
respect to the accounting for stockholders’ equity.

See Full Question And Answer at solutionrank.com

Distinguish among: cash dividends, property dividends, liquidating dividends, and stock
dividends.
Why is the distinction between paid-in capital and retained earnings important?

For a recent 2-year period, the balance sheet of Franklin Company showed the following
stockholders’ equity data at December 31 in millions. (a) Answer the following questions.
(1) What is the par value of the common stock? (2) What is the cost per share of treasury stock at
December 31, 2011, and at December 31, 201

Mr. and Mrs. Lear filed their 2015 Form 1040 on April 1, 2016. In November 2017, they
received a notice of deficiency in which the IRS assessed $19,044 of additional 2015 income tax.
Compute the total amount that the Lears owe the federal government assuming: a. The annual
interest rate (underpayment rate) throughout

(Issuance of Bonds between Interest Dates, Straight-Line, Retirement) Presented below are
selected transactions on the books of Simonson Corporation. May 1, 2010 Bonds payable with a
par value of $900,000, which are dated January 1, 2010, are sold at 106 plus accrued interest.
They are coupon bonds, bear interest at 12

See Full Question And Answer at solutionrank.com

The following comment appeared in the notes of Colorado Corporation’s annual report:
“Such distributions, representing proceeds from the sale of Sarazan, Inc. were paid in the
form of partial liquidating dividends and were in lieu of a portion of the Company’s ordinary
cash dividends.” How would a partial liqui

Sanborn Company has outstanding 40,000 shares of $5 par common stock which had been issued
at $30 per share. Sanborn then entered into the following transactions. 1. Purchased 5,000
treasury shares at $45 per share. 2. Resold 500 of the treasury shares at $40 per share. 3. Resold
2,000 of the treasury shares at $49 per

(Entries for Life Cycle of Bonds) On April 1, 2010, Seminole Company sold 15,000 of its 11%,
15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the
company uses the straight-line method of bond discount amortization. On March 1, 2011,
Seminole took advantage of favorable price

Swarten Corporation issued 600 shares of no-par common stock for $8,200. Prepare
Swarten’s journal entry if (a) The stock has no stated value, and (b) The stock has a stated
value of $2 per share.

Which has the greater chance of audit: a Form 1040 with $200,000 AGI, all of which is salary
income, or a Form 1040 with $200,000 AGI, all of which is net profit from a sole proprietorship?

See Full Question And Answer at solutionrank.com

(Entries for Zero-Interest-Bearing Note) On December 31, 2010, Faital Company acquired a
computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in